Interim Management Statement

Montanaro UK Smaller Companies Investment Trust PLC

Interim Management Statement - 3 months to 31 December 2009

Investment Objective

MUSCIT's investment objective is capital appreciation (rather than income)
achieved by investing in small quoted companies listed on the London Stock
Exchange or traded on the Alternative Investment Market ("AIM") and to achieve
relative outperformance of its benchmark, the FTSE "SmallCap" (excluding
investment companies) Index ("SmallCap"). No unquoted investments are
permitted.

Investment Policy

The Company looks to achieve its objective and to diversify risk by investing
in a portfolio of UK Smaller Companies. At the time of initial investment, a
potential investee company must be profitable and smaller than the largest
constituent of the HGSC Index, which represents the smallest 10% of the UK
Stock Market by value. At the start of 2010, this was any company below £1.188
billion in size. The Manager looks to focus on the smaller end of this Index.

In order to manage risk the Manager will normally limit any one holding to a
maximum of 5% of the Company's investments. The weightings for every stock are
closely monitored to ensure they reflect the underlying liquidity of the
particular company. The Company's AIM exposure is also closely monitored by the
Board and is limited to 30% of total investments with Board approval required
for exposure to be above 25%.

The Manager is focused on identifying high quality niche companies operating in
growth markets. This typically leads the Manager to invest in companies that
enjoy high barriers to entry, a sustainable competitive advantage and strong
management teams. The portfolio is therefore constructed on a "bottom up" basis
and there are no sectoral constraints placed on the Manager.

The Board, in consultation with the Manager, is responsible for determining the
gearing strategy for the Company. Gearing is used to enhance returns when the
timing is considered appropriate. The Company currently has a credit facility
of £15 million through ING Bank of which £10m is currently drawn down. The
Board has agreed to limit borrowings to 25% of shareholders' funds.

Benchmark

FTSE SmallCap (excluding Investment Companies)

Net Asset Value Performance

                  3 months   6 months    1 year   3 years   5 years      Launch
                                                                               
MUSCIT                3.4%      26.5%     42.6%   (18.2%)     38.3%      187.7%
                                                                               
Benchmark           (8.2%)      23.1%     52.7%   (39.3%)   (15.3%)       37.3%


Performance Summary (capital only)

                         As at 31          As at 30        Movement
                    December 2009    September 2009                
                                                                   
Gross assets         £105,963,954      £103,598,061            2.3%
                                                                   
Net asset value           286.09p           277.67p            3.0%
per share                                                          
                                                                   
Share price               227.00p           226.00p            0.4%
                                                                   
Discount                    20.7%             18.6%                
                                                                   
Actual Gearing              10.4%             10.8%                
                                                                   
Net Gearing                  9.5%             10.1%                

Period Review

The third quarter of the Company's financial year to 31 December 2009 saw
positive absolute and relative performance. This was a welcome relief after a
previous challenging six months of underperformance. During this time, there
was a sharp recovery in operationally and financially geared companies that are
not compatible with the Manager's quality investment style.

The FTSE SmallCap Index fell 8% in the fourth quarter of 2009 and
underperformed large stocks for the first time this year. Despite a rather dull
final three months, 2009 was a stellar year for SmallCap. From the period from
9 March to 19 October our benchmark the FTSE SmallCap Index returned 93%,
delivering outperformance of a remarkable 44% against the FTSE 100 Index. After
such a dramatic move, a period of consolidation was to be expected.

Despite this, positive returns could still be obtained from good stock
selection. The portfolio's NAV rose by 3% over the quarter, an outperformance
of 12%. The Company benefited from the shift in the market's style bias away
from recovery stocks in favour of quality growth. This market environment is
one to which the house style is more suited.

The Company's strongest performers over the fourth quarter of 2009 were some of
the portfolio's smaller companies, with the six most material contributors to
performance all being listed on either AIM or the FTSE Fledgling Index. Carclo
(Chemicals; £90m market cap) and Dialight (Electronics; £80m market cap) both
benefited from an increased awareness of the value that LEDs will have both as
energy efficient and cost saving devices. Immunodiagnostics (Health; £190m
market cap), which was up almost 75% in the final three months, continued to
benefit from the value being placed by physicians on testing for Vitamin D and
consequently the company's diagnostic tests were in demand.

While top line growth will be hard to achieve in 2010 it can be found. There
will always be companies that succeed in under promising and over delivering on
earnings forecasts. As these businesses report 2009 results over the coming
months, we expect to see evidence that they have benefited from a combination
of improved competitive positions, weaker Sterling and cost-cutting. This
should leave them with every prospect of recording earnings upgrades and
continued good absolute returns for investors. In an environment that should
reward strong stock-picking, the Company continues to have £10m drawn down from
its facility with ING representing gearing of 10% at the end of 2009. This is
in marked contrast to a year ago when we were un-geared.

Material Events

The Board has announced that following many years of service, Mr Christopher
Jones will not be seeking re-election at the Company's 2010 AGM. Following Mr
Jones's retirement Mr Laurence Petar will be appointed the Senior Independent
Director. The Board has further announced its intention to appoint Miss Kathryn
Matthews as a non executive director with effect from 1 April 2010.

The Board is pleased to report that with effect from February 1st 2010 Charles
Montanaro resumed his role as the Portfolio Manager (at Montanaro Asset
Management) responsible for managing the Montanaro UK Smaller Companies
Investment Trust. Charles Montanaro was the Portfolio Manager from inception of
the Trust in 1995 until 2006. Charles is the Founder, CEO and CIO of Montanaro
Asset Management which today has a total staff of 23. The Board would like to
thank Dan Harlow for his involvement over the last 3 years and wish him well
for the future.

Top Ten Holdings as at 31 December 2009

Company                  Sector                            % of total portfolio
                                                                               
Hargreaves Services      Support Services                                   2.7
                                                                               
Dignity                  General Retailers                                  2.5
                                                                               
Fisher (J) & Sons        Industrial Transportation                          2.5
                                                                               
eaga                     Support Services                                   2.4
                                                                               
Carclo                   Chemicals                                          2.4
                                                                               
Hill & Smith             Industrial Engineering                             2.4
                                                                               
Latchways                Support Services                                   2.2
                                                                               
James Halstead           Construction & Materials                           2.2
                                                                               
Dechra Pharmaceuticals   Pharmaceuticals & Biotechnology                    2.2
                                                                               
Ricardo                  Support Services                                   2.1
                                                                               
                                                                           23.6

Sector Breakdown

Sector                               % of total     % of market
                                      portfolio                
                                                               
Aerospace & Defense                         3.3             2.3
                                                               
Beverages                                   1.8             0.0
                                                               
Chemicals                                   5.4             2.0
                                                               
Construction & Materials                    3.4             4.8
                                                               
Electronic & Electrical                     7.4             1.5
Equipment                                                      
                                                               
Food & Drug Retailers                       1.4             0.3
                                                               
Food Producers                              2.8             2.8
                                                               
General Financial                           6.0             5.5
                                                               
General Retailers                           6.4             6.6
                                                               
Health Care Equipment &                     5.9             3.4
Services                                                       
                                                               
Household Goods                             0.0             1.4
                                                               
Industrial Engineering                      4.0             3.4
                                                               
Industrial Transportation                   4.8             4.1
                                                               
Leisure Goods                               0.0             1.5
                                                               
Life & Nonlife Insurance                    0.0             4.4
                                                               
Media                                       1.4             5.2
                                                               
Mining                                      0.0             2.0
                                                               
Oil & Gas Producers                         2.8             1.6
                                                               
Other                                       0.0             3.2
                                                               
Pharmaceuticals &                           3.0             4.1
Biotechnology                                                  
                                                               
Real Estate                                 7.3            15.1
                                                               
Software & Computer Services                7.5             6.8
                                                               
Support Services                           20.6            12.1
                                                               
Technology Hardware &                       0.0             1.5
Equipment                                                      
                                                               
Travel & Leisure                            4.8             4.4
                                                               
                                          100.0           100.0

This Interim Management Statement and up to date NAV and Share Price are
available at the Company's website www.montanarouksmaller.co.uk.